Improving Predictability of Construction Project Outcomes through Intentional Management of Indirect Construction Costs

Abstract

Indirect construction costs (IDCC) comprise from as little as 10 to 40% or more of the total cost of construction projects, in part depending on the type and nature of the project. Yet, any location in this range represents a significant component of total project costs, which justifies the need to better understand and develop effective practices to estimate, control, and manage IDCC. When IDCC practices are not afforded intentional management and appropriate resources, key project performance outcomes are affected. As its unique contribution to the body of knowledge, this paper operationally defines IDCC, outlines certain innovative IDCC practices, and identifies statistically significant relationships between key IDCC practices and project outcome metrics. Empirical recommendations are premised upon data collected through testimonials, structured interviews, and brainstorming sessions of an extensive set of construction industry professionals. Statistical findings are based upon data collected through 56 one-on-one data-collection interviews with subject matter experts and 47 project-level surveys. Qualitative data were filtered, organized, and aggregated and are technically presented as instructional guidelines. Quantitative data were statistically analyzed and results from this analysis show several significant relationships between IDCC practices and key project outcomes, including a positive correlation between the frequency of IDCC review meetings that included project managers and field supervisors and quality and cost performance.